Immaturity of the pulmonary capillary bed is partly responsible for the respiratory insufficiency experienced by many prematurely born infants. However, factors that regulate the important process of capillary development in the lung are completely unknown. The presence of vascular endothelial growth factor (VEGF), a potent inducer of endothelial cell growth and angiogenesis, in the developing human lung suggests that VEGF plays a role in pulmonary vascular development. We have recently identified abundant VEGF mRNA and protein in type II cells in human fetal lung (HFL) maintained in vitro. Concurrent with in vitro differentiation of type II cells in HFL explants, VEGF protein localizes to the basement membrane region of the distal airway epithelium and endothelial cells migrate to form a continuous band around the VEGF-secreting epithelial cells. Finally, we have detected receptor for VEGF in the distal airway epithelial cells of the fetal lung, suggesting a autocrine role for VEGF in human alveolar epithelium. These data lead us to our major hypothesis that alveolar epithelial cell production and secretion of VEGF is responsible for the development and maintenance of the pulmonary capillary bed. We will test this hypothesis by accomplishing four specific aims: 1.) To determine the roles of type II pneumonocyte differentiation, and regulators of lung development, on VEGF gene expression and VEGF isoform secretion in a model of developing human lung. 2.) To determine if endothelial cells and endothelial cell precursors derived from HFL are stimulated to proliferate, migrate and organize by VEGF. 3.) To determine if alveolar epithelial cell secretion of VEGF is necessary for endothelial cell proliferation and assembly into capillary precursors. 4.) To determine the role of VEGF in alveolar epithelial cell proliferation and differentiation in HFL explants. These studies will be performed in a model of human lung development and with epithelial cells and endothelial cells derived from human fetal lung. An understanding of the mechanisms regulating pulmonary capillary development may lead to strategies for treating newborn respiratory insufficiency by stimulating capillary growth in the prenatal or postnatal lung.